Alan Greenspan warns of 'grave problems' for the US economy if the government does not get the deficit down before it cuts taxes. Photograph: Kevin Lamarque/Reuters

Speaking at the Council on Foreign Relations Wednesday, former Federal Reserve chairman Alan Greenspan – regarded by many, because of his policy of holding down interest rates, as the architect both of the long boom of the late nineties and early noughties and the ultimate bust of 2007 – entered the debate on the deficit, stimulus spending and, most arrestingly, taxes.

"I am in favour for the first time in my memory of raising taxes… I would love to see taxes go down, and I would hope that what we would do is we allow the tax cuts, the so-called Bush tax cuts, all to lapse as they will… on 31 December and then gradually bring the level of expenditure down."

In other words, reducing the deficit is the priority – and taxes should go up to achieve that. "We should not have tax cuts with borrowed money," Greenspan went on, warning of "very grave problems" if we do otherwise.

What do you think: is Greenspan right that the most important thing now is to get the $1tn deficit down? Or should the government give middle-class Americans a break and help the economy recover by putting some money back in their pockets?